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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ed = (%dQd)/(%dP). Ignore negative sign






2. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






3. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






4. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






5. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






6. The lost net benefit to society caused by a movement away from the competitive market equilibrium






7. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






8. The imbalance between limited productive resources and unlimited human wants






9. 0 < Ei < 1






10. Es = (%dQs) / (%dPrice)






11. Entry of new firms shifts the cost curves for all firms upward






12. Exists if a producer can produce more of a good than all other producers






13. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






14. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






15. Total product divided by labor employed. APL = TPL/L






16. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






17. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






18. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






19. Models where firms agree to mutually improve their situation






20. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






21. Demand for a resource like labor is derived from the demand for the goods produced by the resource






22. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






23. The output where ATC is minimized and economic profit is zero






24. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






25. Occurs when LRAC is constant over a variety of plant sizes






26. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






27. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






28. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






29. Ed = 1






30. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






31. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






32. Entry of new firms shifts the cost curves for all firms downward






33. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






34. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






35. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






36. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






37. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






38. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






39. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






40. Ei = (%dQd good X)/(%d Income)






41. AFC = TFC/Q






42. A good for which higher income decreases demand






43. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






44. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






45. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






46. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






47. The additional cost incurred from the consumption of the next unit of a good or a service






48. Entry (or exit) of firms does not shift the cost curves of firms in the industry






49. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






50. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits